CEOs Boosting Their Pensions While Workers Pensions go Poof

I suppose nothing should surprise us about the behavior of greedy CEOs. But, here's another one in a list of "let them eat cake" moments: CEOs are getting major boosts in their pensions, while the pensions of most Americans have either disappeared or take a major hit.

This article largely escaped notice in last week's Wall Street Journal, whose reporters, by the way, often do some pretty damn good investigative digging on corporate malfeasance (see this piece on how our money is paying for CEO pensions and how workers' pensions were being converted to fund CEO pensions). The piece by Mark Maremont (who two years ago wrote a prize-winning piece on the stock option scam) exposes a hidden scam:

Some major companies are boosting the value of retirement plans for top executives by using a generous formula when converting a pension into a single lump-sum payment.

The practice, which remained largely unknown until a recent change in federal disclosure requirements, can increase the value of a CEO's pension by 10% to 40%, sometimes amounting to millions of extra dollars. The additional sums aren't always fully reflected in annual pension-benefit tables included in proxy statements, or in company financial statements, due to the complexities of accounting and disclosure rules. [emphasis added]

The way this works is pretty simple: CEOs try to walk away with a lump sum payout of their gargantuan pension benefits at a very favorable interest rate -- something most workers can't do. It's a nice scam:

One potential beneficiary is Ramani Ayer, the 61-year-old chairman and CEO of insurance giant Hartford Financial Services Group Inc. He hasn't yet retired, and company filings show his accumulated pension was valued at about $27 million as of the end of 2007, if paid out on an annual basis after he leaves.

However, according to Hartford's regulatory filings, Mr. Ayer plans to take the bulk of his pension in a lump sum when he eventually retires. Because of the way Hartford calculates lump sums, that boosted the value of his pension by more than a third, to $37 million, according to the filings.

John Hammergren, chief executive of drug wholesaler McKesson Corp., is another potential beneficiary. McKesson's formula increased the value of his lump-sum pension as of last March by at least $11 million, to almost $85 million, compared with a more conservative calculation, company filings show.

Of course, the rest of us don't have that comfort:

While some executives' benefits are being enhanced, millions of Americans are worried about the security of their own retirement funds. The stock-market plunge has caused a decline in the value of many 401(k)-style accounts, which are primary savings vehicles for about 50 million U.S. workers. Benefit levels in many regular pension plans have been frozen.

It's even worse than that: Since 1978, the number of defined-benefit plans (meaning, real pensions where you can count on a set amount of money no matter what greedy Wall Street traders do) plummeted from 128,041 plans covering some 41 percent of private-sector workers to only 26,000 today (source: Employee Benefit Research Institute). Only 21 percent of workers in the private sector have defined-benefit pensions. And almost have of the people with pensions today don't have them through the companies they work for--basically, because the CEOs are taking whatever cash is left on the table.

Revolution time anyone?

Comments

[Teritt]

It sickened me watching Sam P. on the stage today with Pres Obama. He won't man up to his underhanded job cuts, and before the election he was 'warning' what would happen to jobs if Obama was elected. Made me wonder if some of the thousands of people that were cut during the past 8 days were aimed at Obama donors that they got from fundrace. It wouldn't surprise me.

[sueinmn]

Big Business no longer represents American interests and CEO's are no longer in touch with reality.
How do the stock holders or share holders of companies allow this is just beyond thinking. They are not kings and queens but some how this type of entitlement has been granted.

Folks they have managed to steel the Treasury of the United States with our permission.

SHAME ON US...................!

[cylindar]

If anyone believes that any corporation has in the past or present consider their welfare to be of importance please be notified that you have been duped and are stupid beyond recognition. Let's face it, most people with pensions have sold their souls for that little slice of pie and now they have no pie or soul left. I hope people learn from this that they need to take advantage of every instance to screw the companies they work for and take them for as much as they can get while the getting is good on a real time basis, not on a pension/retirement type plan. When the CEO's return to civility so then will the workers. Yes, you might lose your soul doing this but at least you can enjoy some of the pie. Something is better than nothing unless of course you wnat to be a Ghandi, or Mother Theresa type.

[crazylikeafox]

Where's a Russian hacker who can clean out a bank account like that when you need him?

[AmandaRuth]

more republican "entitlements" and re-distribution of the wealth. They take from us, and flow the money up.

[bangagong]

If you, or I, were to win a Lottery that had an option for a a lump sum payment, we'd get a fraction of the prize.

[windycityjim]

On the way in this morning it dawned on me that if the government could take over the Mustang Ranch, send one of their guys in to run it, why can't they do the same with the banks? May not be as much fun, but if they do it successfully, offer them a deal at the "ranch" as part of their compensation.

[PlanetKansas]

100 years ago, there were only the lucky few that had pensions and the concept of health insurance didn't even exist. People just hoped their children would care for them in their old age, and they died when they got sick enough.

Most of the third world still operates this way and Mumbai Millionaire provides a stark example how most of the other half lives.

Somehow, we thought we could invent systems of money that ensure private retirement, delay our own mortality and that justice would ensure everyone would be treated equally. It should be no surprise that once we created such systems, the powerful would always manipulate them for their own profit. Like the crashes of 1898 and 1929, the money comes and goes and the system is just an illusion managed by scoundrels and propped up by "faith" in the markets and advertising to the masses.

Finally realizing this, I've changed my retirement strategy. I've reduced my 401K contributions to the minimum, the system is rigged against my advantage anyway. I'm also going to continue watching my diet and exercise, because I'll need my health to continue working way past retirement. Finally, I doubt there will be much medical insurance or coverage in 20 years, our individual quests for immortality will ultimately bankrupt the system.

In the end, we will be operating on a system no different from what the Third World already knows.

[Chavez08]

We need Social Democracy more than ever.

[Lilly06]

This is why I say there has to be a move from obeying the letter of the law to obeying spirit and letter of it.

The accounting system in the US must change. It will be hard has it means changing a mindset that has been there fore many years but in light of this economic disaster the spirit of the law should be captured to enable the prosecution of those who do not obey it.

This economic crisis more than anything demonstrates the lack of integrity in the financial services system and a desperate need for a rethink of the way it is regulated.

[marijam]

Richer than Kings with all the perks. That's today's CEOs. We're just the serfs.

[Aaror]

Time for a partner for Social Security: The Pension Guarantee Agency.
Create a Government agency that will take payments from companies in exchange for guaranteeing a pension for workers. This will remove the risk from companies that pension costs will rise, and will remove the risk to workers that a bankruptcy of the company will wipe out their pensions. This would also have an immediate use that would do a lot for the economy:
Ford, GM, and Chrysler could be the first customers. Once the liabilities of all those pension plans (I think the big three average 10 pensioners per worker) are removed from the books, the car companies will have an easier time getting loans, and lower costs per car.

[Oldchef]

"Revolution time, anyone?" Not so far off-base. As things get worse and worse for the 95% of us making less than $200K, seeing things get better and better for those whose greed has kept the rest of us at the bottom of the financial pile, could very well encourage some to bring out the torches and pitchforks and storm the castles of the wealthy. Seriously, people are really getting pissed off. Republican attempts to use the financial crisis they brought on to blame the unions for the debacle and push for wage and benefit cuts for workers while the executives reap millions could well bring a backlash of epic proportions. They really don't seem to understand what can happen when people discover how they've been systematically fleeced, coldly and deliberately robbed of the fruits of their labor.

[exkiodexian]

LOL!!! Comical analysis.

Let me tell you the 2 things "the people" are going to do: COMPLAIN and NOTHING.

Their kids are too busy playing the latest PlayStation games, while Mom worries about what happened on the last episode of Desperate Housewives and Dad switches from Rogaine to Propcia.

Revolution? LOL!!!

[BBackSoon]

Perhaps, but once everyone loses their house and they have no TV to watch or play games on then maybe people will be upset.

Many but I fear not enough of us are not happy right now. If the 30 or 40 percent that are paying attention actually start to stand up we are a force to be reckoned with.

Then again that is what Blackwater was funded to fight against.

By the way, I have several pitchforks and am looking at how to make a torch.

[William1950]

it is time to revolt definitely... i also think we will not though. we have been conditioned, institutionalized so to speak... too lazy and too selfish and too scared.

[fleaba]

It takes a critical mass and we haven't reached that point yet.

[rphillips4165]

I agree. It's already starting to happen around the world. I also agree that we are very complacent in this country. I think we will give Obama at least one term. Then if we aren't on the way back, there will be rioting in the streets. The problem the CEO's haven't thought about is that all that money is only worth what we all believe it is worth. It's really just pieces of paper. If the middle class and the poor get together and decide on using a different form of currency, all their money won't be worth anything.

[Aldyth]

Put five hundred of the top paid CEO's at the bottom of the ocean and what do you have?

A very good start.

[LeftRight]

See that makes no sense to me. If you win the Lottery and take the lump sum they not only take taxes out (35%) but an additional cost (around 35%) meaning that out of a $100,000,000 lotto win you would only take home around $30,000,000. Still a princely sum, I admit, but a REDUCTION, not an INCREASE!

So how, exactly, are they justifying this???